On 10th Anniversary of Seattle WTO, Let’s Move on Trade Liberalization

By November 30, 2009Trade

(Frank Vargo, the National Association of Manufacturers’s vice president for international economic affairs, is blogging from Geneva this week at the ministerial meeting of the WTO. This is his first report.)

This afternoon, Monday, November 30, 2009, marks the official start of the 2009 Geneva Ministerial Meeting of the World Trade Organization (WTO). Whether by design or coincidence, the Ministerial starts on the 10th anniversary of the failed Seattle Ministerial, which opened on November 30th, 1999. November 2009 is also the 8th anniversary of the launch of the Doha Round of trade negotiations.

I am in Geneva, and I was at Seattle. There are similarities and differences. The anti-globalization protests at Seattle were vicious, lengthy, and very destructive. So far, the protests in Geneva have been relatively mild, with some destruction, but limited to a small minority of the demonstrators. We’ll see what happens today.

There are also similarities in the status of the negotiations. The Seattle Ministerial failed not because of the demonstrators but because of failure to reach agreement – principally between the United States and Europe over agriculture and sectoral agreements in industrial trade. Agriculture seems, after eight years of negotiation, to be agreed but for a handful (albeit a difficult handful) of issues, but the sectoral trade agreements (eliminating tariffs in major industrial sectors) is still an unresolved issue.

The Ministerial meeting that starts today ostensibly is not for the purpose of negotiating the Doha Round. Instead the official focus is on reviewing the WTO’s activities and its contribution to development. In talking with people, though, it is clear that Doha is the big undercurrent. The hope is that with so many trade ministers gathered in one place, informal discussions can lead to a narrowing of differences among countries that can clear the way for negotiations early next year.

If those differences are not narrowed, it will be extremely difficult to wrap up the Doha Round in 2010, which is the current objective (the first goal was 2005). The differences are still profound. In the key area of manufactured goods, which comprise about 70 percent of world trade in goods and services, the gulf that has been there since the round started is still there: The advanced developing countries are unwilling to provide major cuts in their tariffs and trade barriers.

What these countries are willing to do now is very little – cutting their applied tariffs by something like 1/10th or 1/8th – and even that would occur about nine years after the negotiations concluded. These advanced developing nations – only about a dozen or so – account for about 2/3 of the tariffs charged on the exports of the least developed countries, and it is hard to see how the development goal of the Doha Round can be reached unless those tariffs are cut significantly. Not coincidentally, the advanced developing countries also account for about 2/3 of the industrial tariffs charged on U.S. exports, which is why cutting these tariffs is necessary if there is to be balance in the negotiations.

And in the area of services trade, which accounts for about 20 percent of global trade in goods and services, the situation is even more dire, in that virtually no new market access has been put on the table.

If differences are to be narrowed here in Geneva this week, these countries have to show their willingness to make significant reductions in their trade barriers. Instead, they are still resisting, basically saying they don’t know what the United States wants. But the United States has been clear for a lot of years now, and the problem is these countries have not been willing to listen.

The key U.S. objective in the manufactured goods negotiations is, and has consistently been, to achieve an ambitious and balanced outcome that results in significant new market access through cuts in applied tariff rates in both developed and key advanced developing country markets. And the U.S. has long said that this outcome must be comprised of all three elements from the July 2004 in tandem. There is an inextricable link between the formula, flexibilities, and sectoral initiatives.

That link is what the advanced developing countries have refused to listen to, instead wanting to hive off the sectoral dimension. Remember, this is only for the advanced developing nations – those that have become major factors in global manufactured goods trade. The other developing countries are not being asked to do anything.

The Bush Administration made it plain that participation by advanced developing nations was a “must-have” issue for the United States, and is one of the key reasons U.S. negotiators rejected the December 2008 deal that was being pressed.

Somehow, though, a feeling seemed to develop that the Obama Administration could be pressed into accepting the deal that the Bush Administration had already rejected as providing insufficient balance and global access.

Hopefully, as Ministers gather this week, they will focus on the fact that the Obama Administration is serious about obtaining a more meaningful outcome, with significant new market access that will genuinely contribute to new trade flows. Michael Punke, President Obama’s nominee for Deputy U.S. Trade Representative (Geneva) couldn’t have been more clear in responding to questions from his recent Senate confirmation hearing, when he said, “… the Doha deal that was put on the table in 2008 was unacceptable. It was neither balanced nor ambitious and would not create meaningful new market access for the United States, particularly with regard to key emerging markets….”

The United States has been the sparkplug for every multilateral trade round, and is still performing that role today. Other key nations need to step up to the plate, and hopefully this week’s Geneva meeting can lead to a growing sentiment that advanced developing nations have to move off dead center, have to stop saying they don’t know what the United States wants, and have to agree to negotiate seriously and quickly.

Wouldn’t it be marvelous if, at Geneva this week, the G-20 group of major global economies, which includes the major industrial and developing economies, announced that in view of the need to kick-start trade and global growth, especially for the poorest countries – they were announcing their agreement to enter into sectoral agreements in major manufacturing areas – and also that they have agreed to negotiate real reductions in services barriers.

I’m not predicting this, but there is always hope. More tomorrow.

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